Foreign Investment Screening and National Security: the case of Italy

What is it about?

This chapter of the book illustrates the golden power law of Italy and its evolution, as well as national security as an exception in Italy’s Model Bilateral Investment Treaty. In Italy, the concept of national security has been gradually defined by the Constitutional Court and relevant policy documents, which encompasses security from both external threats such as national defense, and internal stability such as public order and security. To protect the ‘essential interest’ of Italy, Italy introduced the "golden shares" law in 1994, which reserved special rights to the State holding a minority share in strategic companies in key sectors. After being criticized for violating the EU’s fundamental freedom of movement of capital, the golden shares system was replaced by the golden powers law in 2012. The golden powers law establishes an ex-ante screening system applicable to both EU and non-EU foreign investors, for the takeover of Italian public or private companies in sectors of ‘strategic importance’, inter alia, national defence, energy, transportation and communications. It at first resulted in a ‘definitory seism, with debate spurring for some time regarding the interpretation of core notions’ that were left undefined. 1 With the frequent updates and amendments to the law between 2017 and 2022 due to technological developments such as 5G and the COVID-19 pandemic, the golden powers regime has been gradually equipped with legal instruments that filled the existing gaps, however, at the price of an arguably cumbersome legal framework. The authors point out that the Italian FDI screening is overall coherent with principles recommended by international organizations, the requirements of EU law, and the systems in other EU Member States, however improvements are desired in terms of a more delineated procedure and less bureaucratic burden.

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